The cost of late payments to New Zealand small businesses has surged by 81 percent, from $456 million in 2021 to $827 million in 2023, as reported by Xero's Small Business Insights program.
Xero's Country Manager, Bridget Snelling, highlighted that many larger companies are using small businesses as a form of accessible capital, delaying payments to support their operations, which significantly impacts the small business economy. The repeal of the Business Payment Practices Act 2023 further exposed these issues, restricting growth and limiting opportunities for new businesses.
Despite the economic challenges and inflation in 2023, which made timely cash flow even more critical, payment times remained largely unchanged. Many businesses have long advocated for improved payment practices, with Xero encouraging larger businesses to pay invoices within 10 business days — an approach also adopted by 95 percent of government agencies.
Snelling also emphasised the importance of embracing digital tools to improve payment practices. Small businesses are encouraged to work with accountants or bookkeepers to manage rising costs, explore digital payment solutions, and reduce late payment barriers. Financial modeling by the New Zealand Institute of Economic Research indicates that a 20 percent increase in adopting cloud-based business tools could contribute $7.8 billion to New Zealand's GDP through increased productivity.
Digitalisation, including eInvoicing and pay-now buttons, is key to simplifying payment processes for small businesses. The development of solutions that enhance payment efficiency and ensure healthier cash flow for small enterprises is vital. Supporting small businesses in embracing digital tools is essential to unlocking their economic potential and fostering growth in New Zealand's small business sector.
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